Entrepreneur deductible items and SME profit exemption

As an entrepreneur you can qualify for certain deductible items. In general a number of conditions apply. The most important condition is that you must meet the hour criterion. In concrete terms, that means that you spend at least 1,225 hours on your business in a calendar year. Hours that you must be able to see if the Tax Authorities ask for it.

If you meet the hour criterion, you may be entitled to the following deductible items:
1. The self-employed deduction
2. The deduction for research and development work
3. The cooperation deduction
4. The start-up allowance for incapacity for work
5. The strike deduction

1. The self-employed deduction

The self-employed deduction is a deductible item from the taxable income of entrepreneurs. In order to be able to apply this deductible item, you must (in addition to the hour criterion) also meet the following conditions:

• You are an entrepreneur for the Tax Authorities
• The company is managed by you (or together with others)
• You were less than 65 years old at the start of the calendar year

If you are a starting entrepreneur, this deductible item may be even more advantageous since you are then entitled to a maximum of three years' starter's allowance.

2. The deduction for research and development work

The Research and Development Work Promotion Act is a tax arrangement to promote research and development for innovation and technical innovation. You can claim if you meet the following criteria:

• You are an entrepreneur
• You meet the hour criterion
• You have a research and development work statement from rvo.nl This states that your work falls under research and development work and the amount you can deduct for this.
• A minimum of 500 hours of recognized research and development work.

Starting entrepreneurs can also claim an increased deduction. You can find more information about research and development work on www.rvo.nl.

3. The employee allowance

The employee allowance is a tax deductible item for entrepreneurs whose partners cooperate in the case but do not receive a salary for it. The employee allowance depends on the number of hours worked. You must be able to provide insight into these hours. The conditions for this deductible item are:

• You are an entrepreneur
• You meet the hour criterion.
• Your tax partner works 525 hours or more in your company without compensation, or the compensation that you pay for this is less than € 5,000.

4. The start-up allowance for incapacity for work

In order to give starting entrepreneurs with a work disability more chances, the start-up allowance for incapacity for work has been created. You can make use of this scheme if you:

• You are an entrepreneur for the tax authorities
• Has not yet reached the state pension age
• Entitled to a disability benefit
• In the five preceding calendar years, at least one year was not an entrepreneur
• Does not meet the 1,225 hour hour criterion, but does meet the reduced 800 hour criterion.

5. The strike deduction

Did you discontinue your entire business, for example because you sold your business? Then you must pay tax on the strike profit. If this is the case, you may deduct the strike deduction from the strike profit.

The SME profit exemption
The SME profit exemption is a deduction from your profit. You will receive this exemption if you are an entrepreneur. This exemption is a percentage of the profit achieved from one or more companies. In 2017, 2018 and 2019, the SME profit exemption amounts to 14 percent of the profit. You first have to reduce the profit with the entrepreneur's allowance.

If you want more information about deductible items and what that means in your situation, please contact us.